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Trump shuts down subsidies to the Affordable Care Act

President Trump signs an executive order on health care the White House Thursday. Photo by Jabin Botsford/The Washington Post.

WASHINGTON - President Donald Trump is throwing a bomb into the insurance marketplaces created under the Affordable Care Act, choosing to end critical payments to health insurers that help millions of lower-income Americans afford coverage. The decision follows an executive order on Thursday to allow alternative health plans that skirt the law's requirements.

The White House confirmed late Thursday that it would halt federal payments for cost-sharing reductions, although a statement did not specify when. According to two people briefed on the decision, the cutoff will be as of November. The subsidies total about $7 billion this year.

Trump has threatened for months to stop the payments, which help eligible consumers afford their deductibles and other out-of-pocket expenses, but held off while other administration officials warned him that such a move would cause an implosion of the ACA marketplaces that could be blamed on Republicans.

Health insurers and state regulators have been in a state of high anxiety over the prospect of the marketplaces cratering because of such White House action. The fifth year's open-enrollment season for consumers to buy coverage through ACA exchanges will open in less than three weeks, and insurers have said that stopping the cost-sharing payments would be the single greatest step the Trump administration could take to harm the marketplaces - and the law.

Ending the payments is grounds for any insurer to back out of its federal contract to sell health plans for 2018.

The cost-sharing reductions have long been the subject of a political and legal seesaw. Congressional Republicans argued that the sprawling 2010 health-care law that established the subsidies does not include specific language providing appropriations to cover the government's cost. House Republicans sued HHS over the payments during former President Barack Obama's second term. A federal court agreed that they were illegal, and the case has been pending before the U.S. Court of Appeals for the D.C. Circuit.

"The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system," a statement from the White House said. "Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people."

For months, administration officials have debated privately about what to do. The president has consistently pushed to cut them off, according to officials and advisers who spoke on the condition of anonymity to discuss private conversations. Some top health officials within the administration, including former Health and Human Services secretary Tom Price, cautioned that this could exacerbate already escalating premiums on the ACA market, these Republicans said.

But some government lawyers also argued that the payments were not authorized under the existing law, according to one administration official, and would be difficult to keep defending in court.

While the administration will now argue that Congress should appropriate the funds if it wants them to continue, such a proposal will face a serious hurdle on Capitol Hill. In a recent interview, Rep. Tom Cole, R-Okla., who chairs the House Appropriations Subcommittee overseeing HHS, said it would be difficult to muster support for such a move among House conservatives.

One person familiar with the president's decision said that HHS officials and Trump's domestic policy advisers had urged him to continue the payments at least through the end of the year.

The cost-sharing payments are separate from a different subsidy that provides federal assistance on premiums to more than four-fifths of the 10 million Americans with ACA coverage.

Word of the president's decision, which was first reported by Politico, came just hours after he signed the executive order intended to circumvent the ACA by making it easier for individuals and small businesses to buy alternative types of health insurance with lower prices, fewer benefits and weaker government protections.

The White House and allies portrayed the president's move as wielding administrative powers to accomplish what congressional Republicans have failed to achieve: fostering more coverage choices while tearing down the law's insurance marketplaces. Until the White House's announcement late Thursday, the executive order represented Trump's biggest step to date to reverse the health-care policies of the Obama administration, a central promise since last year's presidential campaign.

Critics, who include state insurance commissioners, most of the health-insurance industry and mainstream policy specialists, predict that a proliferation of these other kinds of coverage will have damaging ripple effects, driving up costs for consumers with serious medical conditions and prompting more insurers to flee the law's marketplaces. Part of Trump's action, they say, will spark court challenges over its legality.

The most far-reaching element of the order instructs a trio of Cabinet departments to rewrite federal rules for "association health plans" - a form of insurance in which small businesses of a similar type band together through an association to negotiate health benefits. These plans have had to meet coverage requirements and consumer protections under the 2010 health-care law, but the administration is likely to exempt them from those rules and let such plans be sold from state to state without insurance licenses in each one.

In addition, the order is designed to expand the availability of short-term insurance policies, which offer limited benefits as a bridge for people between jobs or young adults no longer eligible for their parents' health plans. The Obama administration ruled that short-term insurance may not last for more than three months; Trump wants to extend that to nearly a year.

Trump's action also is intended to widen employers' ability to use pretax dollars in "health reimbursement arrangements" to help workers pay for any medical expenses, not just for health policies that meet ACA rules - another reversal of Obama policy.

In a late-morning signing ceremony in the White House's Roosevelt Room, surrounded by supportive small-business owners, Cabinet members and a few Republicans from Capitol Hill, the president spoke in his characteristic superlatives about the effects of his action and what he called "the Obamacare nightmare."

Trump said that Thursday's move, which will trigger months of regulatory work by federal agencies, "is only the beginning." He promised "even more relief and more freedom" from ACA rules. And although leading GOP lawmakers are eager to move on from their unsuccessful attempts this year to abolish central facets of the 2010 law, Trump said that "we are going to pressure Congress very strongly to finish the repeal and replace of Obamacare."

The executive order will fulfill a quest by conservative Republican lawmakers, especially in the House, who have tried for more than two decades to expand the availability of association health plans by allowing them to be sold, unregulated, across state lines. On the other hand, Trump's approach conflicts with what he and GOP leaders in Congress have held out as a main health-policy goal - giving each state more discretion over matters of insurance.

Health policy experts in think tanks, academia and the health-care industry pointed out that the order's language is fairly broad, so the ensuing fine print in agencies' rules will determine whether the impact will be as sweeping or quick as Trump boasted - his directive will provide "millions of people with Obamacare relief," he said.

Significant questions that remain include whether individuals will be able to join associations, a point that could raise legal issues; whether the administration will start to let association health plans count toward the ACA's requirement that most Americans carry insurance; and whether such plans can charge higher prices to small businesses with sicker workers - or refuse to insure them.

The president issued the directive less than three weeks before the Nov. 1 start of the fifth open-enrollment season in ACA marketplaces for people who do not have access to affordable health benefits through a job. Trump noted that about half of the nation's counties will have just one insurer in their exchange, and he claimed that "many will have none." However, the most recent canvass shows that there will be no "bare" counties in 2018.

A senior administration official, speaking to reporters on the condition of anonymity shortly before Trump signed the order, said that the policy changes it sets in motion will require agencies to follow customary procedures to write new rules and solicit public comment. That means new insurance options will not be available in time for coverage beginning in January, he said.

Even so, with a shortened sign-up period and large cuts in federal funds for advertising and enrollment help already hobbling the marketplaces, "if there's a lot of hoopla around new options that may be available soon, it could be one more thing that discourages enrollment," said Larry Levitt, the Kaiser Family Foundation's senior vice president.

Other aspects of the executive order include commissioning a six-month study, to be led by federal health officials, of ways to limit consolidation within the insurance and hospital industries. Trump also directed agencies to find additional means to increase competition and choice in health care to improve its quality and lower its cost.

The order produced predictable reactions in Congress, with Republican leaders praising the move and Democrats accusing the White House of sabotaging the law.

Among policy experts, critics warned that young and healthy people who use relatively little insurance will gravitate to association health plans because of their lower price tags. That would concentrate older and sicker customers in ACA marketplaces with spiking rates.

Mike Consedine, chief executive of the National Association of Insurance Commissioners (NAIC) said Thursday that the group has long opposed such plans and is concerned that the administration will allow ones that can bypass state licenses and have such weak financial underpinnings that some will collapse, leaving customers stranded and state insurance regulators "picking up the pieces."

Short-term health insurance makes up a tiny fraction of the policies sold, with fewer than 30 companies covering only about 160,000 people nationwide at the end of last year, according to NAIC data.

Experts could not point to figures for how many association health plans exist or how many people they insure. Such arrangements have existed for decades, and scandals have on occasion exposed "multi-employer welfare arrangements" started by unscrupulous operators who took members' money and either did not have enough reserves to cover hospital bills or absconded with premiums.

The National Federation of Independent Business, a small-business lobby, has pressed Congress to allow use of association plans, arguing that they can be less expensive and give workers more insurance choices. Sen. Rand Paul, R-Ky., has promoted the idea, and he stood just behind Trump at the morning ceremony. After nearly walking out of the room without signing the order, the president returned to affix his signature to the document and then hand Paul the pen.

Selling health plans from state to state without separate licenses - the idea underlying much of the president's order - has long been a Republican mantra. It has gained little traction in practice, however.

Half a dozen states - before the ACA was passed in 2010 as well as since then - have passed laws permitting insurers to sell health policies approved by other states. And since last year, the ACA has allowed "compacts" in which groups of states can agree that health plans licensed in any of them could be sold in the others. Under such compacts, federal health officials must make sure the plans offer at least the same benefits and are as affordable as those sold in the ACA marketplaces.

As of this summer, "no state was known to actually offer or sell such policies," according to a report by the National Conference of State Legislatures. A main reason, experts say, is insurers' difficulty in arranging networks of doctors and other providers of care far from their home states.